This section of the chapter comes when Nick goes to visit Gatsby, and, having heard so many different versions of Gatsby's background from the party the night before, receives Gatsby's version of his past. Gatsby says that he tells Nick "God's own truth," before proceeding to say that he was born to wealthy people in the Middle West and then educated in Oxford. Note how Nick responds to this revelation, and his reasoning for suspecting he is being lied to:
He hurried the phrase "educated at Oxford," or swallowed it, or choked on it, as though it had bothered him before. And with this doubt, his whole statement fell to pieces, and I wondered if there wasn't something a little sinister about him, after all.
This quote is important because Fitzgerald uses it to highlight the ambiguity concerning Gatsby in Nick's mind. On the one hand, Gatsby is an inspirational, charismatic figure, but on the other hand, at various points in the text, Nick feels that the compromises Gatsby has made to become the "great" Gatsby make him "a little sinister." It is clear that this is not the only time that Nick feels lied to by Gatsby, and he struggles to assmilate this reality with the other reality of Gatsby in his mind.